The euro declined as German Chancellor Angela Merkel said the currency’s strength was making policy changes difficult for the region’s most-indebted nations.
Greece’s situation also weighed on the shared currency as officials, including Merkel, ramped up pressure on the indebted nation to forge an agreement with creditors as default looms. A gauge of the dollar advanced as wholesale prices rose more than forecast, enhancing the prospect of higher rates in the U.S.
“Things are quiet and rangy and so that’s where comments can actually move things a bit,” Greg Anderson, Bank of Montreal’s global head of foreign-exchange strategy, said by phone from New York. Merkel “wasn’t trying to talk down the currency, she was just reflecting on the tough realities for the euro zone,” he said.
The euro fell 0.3 percent to $1.1221 as of 9:33 a.m. New York time It dropped 0.1 percent to 138.87 yen.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 of its major peers, advanced 0.4 percent to 1,179.02.
A too-strong euro makes it tougher “for countries like Portugal, Spain, Ireland, but especially Spain and Portugal,” to harvest the fruits of their economic reforms, especially in terms of exports, Merkel said in a speech at a family-enterprise conference in Berlin.
While the euro has strengthened about 7 percent from its more than 12-year low of $1.0458 in March, it has still fallen 17 percent against the dollar during the past 12 months.
Merkel joined a chorus of politicians and central bankers talking about their currencies this week. Remarks by Bank of Japan Governor Haruhiko Kuroda and his Australian counterpart Glenn Stevens jolted the yen and Australian dollar, while the U.S. dollar fell Monday after a later-denied report that President Barack Obama said dollar strength could be a problem.
“It seems like everybody is at it this week,” said Jane Foley, a senior currency strategist at Rabobank International in London. “When someone of Merkel’s stature does come out and make a comment clearly the market will stand up and listen.”
Greece’s failure to reach an accord on its debt also weighed on the currency.
The nation was given less than 24 hours to come up with firm proposals to end the impasse at a meeting of euro-area government employees late Thursday, two officials present said. Policy makers are now examining all scenarios if Greece refuses to compromise, including the possibility that the country could eventually leave the currency, said the officials.
The Bild newspaper reported that Germany’s government is no longer ruling out a Greek default, citing people familiar with the plans.
Greece was told to stop opposing creditors’ demands and sign a deal that will avert default. European Union President Donald Tusk rebuked Greek Prime Minister Alexis Tsipras on Thursday for dragging his feet on an agreement. The International Monetary Fund’s team were said to have walked out of negotiations in Brussels.
“Some of the optimism about a deal has been reversed this week,” said BMO’s Anderson. “I still don’t think the market is anywhere close to priced for there not being a deal and a Greek default.”